UOB Global Economics & Markets Research said that next year’s prospects are subject to downside risks with uncertainty mainly emanating from the incoming Trump administration’s trade and tariff policies.
PETALING JAYA: Economists are generally cautious over Malaysia’s external trade for the remainder of 2024 as well as for next year, despite gross exports in October having bounced back into the positive with a marginal 1.6% year-on-year (y-o-y) growth.
Most research houses were quick to point out that the growth of exports in October had come in below Bloomberg’s consensus expectations of 2.5%, although it had been primarily supported by increased shipments of manufactured goods, particularly electrical and electronics, rubber products and processed food and agriculture goods.
Unsurprisingly, the outlook for external trade moving forward will be influenced by the recent US presidential election, with real estate mogul Donald Trump set to return to the White House.
UOB Global Economics & Markets Research said in a note to clients that next year’s prospects are subject to downside risks with uncertainty mainly emanating from the incoming Trump administration’s trade and tariff policies.
“The upside for Malaysia is potential diversion of trade, front-loading of exports ahead of Trump’s proposed tariffs and higher US demand given that the potential tariff changes could still favour a lower tariff for non-China trade partners,” said the research outfit.
It said there are also enhanced buffers for Malaysia from trade diversification and supply chain configurations, while regional investment and construction activities lend another supportive channel.
As such, pending more clarity on US policies, the brokerage is keeping its export outlook of 7.6% growth for this year, and a 4.5% gain for 2025.
Concurrently, Kenanga Research reported that export growth reached 4.8% y-o-y in the first 10 months of this financial year (10M24), which came slightly lower than the research unit’s full-year growth target.
It forecasted growth to accelerate in November and December, banking on the global technology cycle, rising artificial intelligence demand and stronger-than-expected US demand.
Notably, it said exports to the United States rose 19.2% y-o-y for 10M24, offsetting China’s 2.6% decline.
“The United States is now Malaysia’s largest export destination with a 14.8% share, followed by Singapore at 14.7% and China with 12.5%.
“While China has introduced stimulus measures, its path to sustainable recovery remains uncertain given that its third-quarter growth has slowed to 4.6%,” said Kenanga Research.
It added that a renewed US-China trade war under the Trump presidency poses risks, but may benefit Malaysia through trade and investment diversion.
Thus, it predicted export growth to stay around 4.9% for the whole of 2024, before moderating further to 3.5% next year.
According to Hong Leong Investment Bank Research, the uncertainty over trade policy and further global trade fragmentation could increase volatility, with stronger price pressures and lower demand.
Nevertheless, it said Malaysia’s neutral stance, diverse export structure and continued regional cooperation are expected to mitigate some of these risks.
Maintaining a prudent outlook with the anticipation of Trump retaking office in January, Maybank Investment Bank Research pencilled in exports and imports to grow at 5% and 13.7%, respectively, for this year, resulting in a trade surplus of RM119.5bil.
The research house projected 2025 to chart respective exports and imports growth of 4.8% and 6.8%, bringing in a RM100bil trade surplus.
